$8,000 Home Buyers Tax Credit: What We Currently Know

Update: Saturday Feb 14 — here is an article with a chart highlighting the changes in the first time home buyers tax credit. ~~It is expected to be signed into law by Feb 16~~. The Stimulus Bill was signed into law by the President on Feb 17.

“It’s $15,000. No wait, it’s $8000. Or is it $7,500? It has to be paid back. No it doesn’t! Yes, it does! It’s only for first time home buyers. Nuh uh!”

That’s about what the conversation sounds like if you are trying to figure out what the latest incarnation of the Stimulus bill contains with regard to a tax credit for home buyers.

It’s confusing as hell. Believe me, I’ve read a lot about it.

Here’s what we know to be the absolute truth so far:

Nothing. The simple fact is, the compromised version of the stimulus bill has not been voted on by either the House or the Senate. Until it is, it can change.
If you try hard enough and read enough of the (literally) tens of thousands of news articles you can find whatever answer you want. Such is the nature of legislation of this magnitude. It is in almost constant flux. But if you read enough, common themes start to come across. . .

**Here is the general consensus on the $8000 home buyer tax credit so far**:

The $15,000 tax credit for home buyers that was in the Senate’s version has been reduced to $8,000.
The $8,000 tax credit will only be for first time home buyers (opinion seems mixed on whether that means you can’t have owned a home for two, or three years).
Unlike the already existing $7,500 first time home buyer “credit”, the new $8,000 is a true tax credit – it does not have to be repaid.
There is likely going to be an income cap. Make some level of income and the credit will either be phased out or eliminated. I’ve seen very little speculation on what that limit will be.
Opinion seems to be split on whether or not the tax credit will be refundable, or can only be applied against your actual tax liability.

I stress “general consensus” because again, nothing has been finalized. Reports yesterday indicated a House vote was likely today. The mainstream media is now reporting a House vote is likely tomorrow (Friday Feb13) with a Senate vote over the weekend and the President signing Monday.

You’d think the House of Representatives would be discussing the stimulus package at this very moment. A quick check of C-Span Live though shows Representatives from Pennsylvania discussing the Pittsburgh Steelers Superbowl win. Yes, the House is debating at this moment in time whether to pass House Resolution 110 congratulating a football team. Whether to support “National Wear Red Day” is up next.

You can’t make this stuff up.

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Tagged as: 15K Tax Credit, 8K Tax Credit, Stimulus

Potentially Related Posts on Phoenix Real Estate Guy:

Federal $8000 Housing Tax Credit Explained

Using the $8,000 First Time Homebuyers Tax Credit as a Down Payment. Sort of.

Homebuyer Tax Credit Extension: It’s Crunch Time

Read this blog's Comment Policy

Doug Quance

Thanks for the update, Jay.

Congress has had the last couple of years to help the housing industry - but they have not. Sen. Isakson's amendment was particularly thoughtful, as he was a real estate broker back in the late 70's when the housing supply reached three years.

It was governmental intervention that got us into this mess... so I guess I'm not surprised if they dig the hole a little deeper. Or a whole lot deeper, for that matter.

<abbr></abbr><abbr>Doug Quance´s last blog post..The Atlanta Housing Crisis Continues To Claim More Victims</abbr>

Jessica Beganski

I think all Congress should be allowed to vote on is whether to support National Wear Red Day. They have no clue about anything else.

I had mixed feelings on the $15k credit. While I think it may just reward some people for doing what they were going to do anyway, like the first time buyer buying a house, it may have encouraged higher end buyers. These are the more seasoned buyers, too, who have seen ups and downs. First time buyers are still going to be scared...even with a puny tax credit.

If they put an income cap on it, the benefit in my state will be negligible, since our median income is around$57k.

<abbr></abbr><abbr>Jessica Beganski´s last blog post..Nevermind - The $15,000 Credit Is Out</abbr>

Property Qwest

Hi Jay,

Your last thoughts say it all. Republican, Democrat, or affiliations anywhere in between (or outside for that matter), should be disgusted with the behavior of WAY TOO MANY of our elected officials.

This garbage NEEDS TO STOP and the American people need to be more vested in holding these people accountable. This incompetence is completely unacceptable and would sink all of our businesses if we operated similarly!

Please get on to addressing the matters at hand. Needless to say, a solid incentive applied towards housing will go a long ways towards helping the overall status of the housing market.

<abbr></abbr><abbr>Property Qwest´s last blog post..Cleaning Out Foreclosures</abbr>

Tim

CSpan has a document that describes what all of the current tax provisions in the stimulus plan are. Housing info is on Pg 2.

Here's the link .

Looks like it is only first time home buyers (but that qualification is not defined) and that the credit has in fact been reduced to $8k. The credit appears to also be refundable, so that all tax payers, regarless of tax liability, will be able to take advantage of this particular credit. The credit includes qualifying purchases made prior to 12/1/2009. BUT as Jay and many others have stated, this could all change if it doesn't pass the house and the senate this weekend.

Tim

CSpan has a document that describes what all of the current tax provisions in the stimulus plan are. Housing info is on Pg 2.

Here’s the link . (http://www.c-span.org/pdf/taxprovisions.pdf)

Looks like it is only first time home buyers (but that qualification is not defined) and that the credit has in fact been reduced to $8k. The credit appears to also be refundable, so that all tax payers, regarless of tax liability, will be able to take advantage of this particular credit. The credit includes qualifying purchases made prior to 12/1/2009. BUT as Jay and many others have stated, this could all change if it doesn’t pass the house and the senate this weekend.

Lisa Kelderman

Thank you for your posts about the possible Stimulus-created tax credit for homeowners. We live in Iowa and have been checking your website daily because we are just as confused as everyone else! I truly hope that the government sees the need to offer this to ANY potential home buyer, regardless of income, first time or not, etc. We are desperately hoping to move into a bigger house, and this tax credit will make or break that possibility. I think it is crucial to offer it to everyone, to help stimulate the housing market. Thanks again for keeping all of us updated, even if we live in Iowa!

MaryAnn Knell-Peoria Real Esta

I have to agree with Property Quest; we should all be annoyed that our representatives are actually debating voting on a "national wear red day" instead of figuring out if there will be a stimulis package or not.

<abbr></abbr><abbr>MaryAnn Knell-Peoria Real Estate´s last blog post..10 Steps to Achieving the American Dream of Home Ownership!</abbr>

Jim Dolanch-Pittsburgh Real Es

Thanks for keeping us all updated, Jay. This really is a mess when you start trying to read through everything and figure out what is getting put through for a vote. We will just have to wait and see what the final deal is.

tyler

Here's the link to the current version of the stimulus package:

http://appropriations.house.gov/pdf/Recovery_Bi...

See page 24 on the new homebuyer's tax credit...again, until the house and senate pass this and it is signed by the president, anything can change...there is still heated debate going on...

But it seems pretty clear that the current bill amends the current $7,500 tax credit to increase it to $8,000 and waive the requirement to repay it. It throws out the senate version completely...

Hopefully this will clear up confusion...it is better than reading the news stories - then to see the actual text itself...

Jim Dolanch-Pittsburgh Real Es

I was wondering, Jay, do you think that the tax credit of 7,500 will help entice people to buy? The 15K I'd say yes, but I'm not so sure 7,500 will be enough to really get people out there buying.

Bob@Maine Waterfront Real Esta

I thought this will be the day we could determine the final tax credit it seems that it will took more time before they come up with the "final bill."

Buenos Aires Real Estate

Thanks for the update!

Matt

Based on my reading of the current rule - and the amendment Tyler posted in No. 9, I've made the changes in ALL CAPS to these two provisions. My reading of it is that (a) you can claim it on your 2008 return, (b) it applies to first-time homebuyers in 2009. It does eliminate repayment for 2009 purchases. And it's refundable.

Also, I think it could be read to suggest they are allowing folks who bought after April 9, 2008 - Dec. 31, 2008 to claim the $8,000, but it will have to be repaid.

Any thoughts?
Here is the updated version with the changes in ALL CAPS
---------------
(g) Election to treat purchase in prior year.--In the case of a purchase of a principal residence after December 31, 2008, and before DECEMEBER 1, 2009, a taxpayer may elect to treat such purchase as made on December 31, 2008, for purposes of this section (other than subsection (c)).

(h) Application of section.--This section shall only apply to a principal residence purchased by the taxpayer on or after April 9, 2008, and before DECEMBER 1, 2009

The Harriman Team

I agree with Property Qwest and Mary Ann...Congress should be up to their eyeballs in getting this bill passed in some form that is equitable to both parties and, more importantly, beneficial to the people they so poorly represent. I'm almost ashamed to admit that my vote helped put these clueless airheads in office, but I accept my share of the blame. Since they'll soon be discussing National Wear Red Day, perhaps we can slip in a bill to declare tomorrow National Wear Black Day, since most of Congress seems to be suffering from a terminal case of Stimulus Interruptus.

<abbr></abbr><abbr>The Harriman Team´s last blog post..$15,000 Tax Credit Out, $8,000 Tax Credit In.</abbr>

Ted Betz

I have to thank you for updating the status of the home buyers tax credit over the past week or so. You have had the nost up to date, and accurate reporting I could find on the web.

Dave@Lift Chairs

The Harriman Team, I don't think enough people realize that the problem was not and is not solely in the White House. Congress is just as responsible if not more so for our current economic situation.

tyler

Dave - i fully agree - the past 4 years especially congress AND the white house were spending money like drunken sailors. They were also allowing bad mortgages to occur and pushing the lending companies to give loans to people who would not have qualified 10-15 years ago. In 2006, there were congressmen who warned this was trouble and pushed regulation, but those in power did nothing, basically giving Fannie Mae and Freddie Mac a pass - and encouraging them to continue giving out these bad mortgages.

Lint

I decided to purchase partly based on the $7,500 interest free loan. I am in the process of closing, and am hoping to get the $8,000 credit. I skrimped and saved to have a downpayment.
It makes a big difference! House prices climbed 75% in a very short time, squeezed out working-class buyers like myself. Now prices are more reasonable, but I still fear they will drop more. I don't want to make a $#!^ load of quick money, just want to own a home and build some equity, and have it the way I want it. The money I will get back will hire exterior painters and masons. And I will have a reasonable home to call my own.
I think this is the intent of the credit. Not for a vacation, or second home, not for greedy flippers, not for banks; for people in my cirumstances, hard working and wanting a home of their own.

Cary real estate

This is just another attempt to re-inflate the housing bubble. The fundamental problem is that the middle class can no longer afford an average-priced home. The root cause of this is that millions of middle class manufacturing jobs in this country have been lost overseas. The only way the middle class can make ends meet now is through financial gimmicks that mask the real problem - the loss of decent-paying jobs in this country. This housing tax credit may start putting money back into the pockets of real estate agents, mortgage brokers and the rest of the real estate industry - all of whom already profited greatly during the most recent housing bubble. But remember, these people don't create wealth or produce anything - as happens in manufacturing. All real estate people do is transfer assets from one homeowner to another while lining their own pocket.

Regards,
Michael McLaughlin, Cary real estate

Cary real estate

Well, we cannot really say what is the real score about the bill, as long it is under the senate and congress office. We can really know when the house convene and pass a final draft of the law. I just hope the senate and congress not only bill out the new home owners, but also the existing homeowners whose houses are on foreclosure. Cheers, Michael McLaughlin, Cary real estate

Jay - The Phoenix Real Estate

@Michael McLaughlin - the bill was signed into law by the President on Feb 17. So we know the real score about the $8000 first time homebuyers tax credit...

jeff@T1 internet

I heard it is rated on how much the home cost also. Not sure if that is true and because it is tax credit it is not the actual value only what you would save with the deduction. I think people think they will get that much back in taxes but that does not work that way.

panama real estate

The way I see it is congress is doing damage control. If they gave away the benefit to everyone then they would pay out a lot more $8000 than if they limited to a particular group.

Cheers,Samuel,Panama real estate.

real estate in panama

It’s all about PR. Can’t make everyone happy so what’s the cheapest way to make themselves look good? That’s the road they take.

It’s the same thing with taxes, why do you pay more percentage of taxes the more money you make? You get the same benefits as everyone else you should pay the same thing as a flat rate.

Oh well that’s just how things work so accept it.

Cheers,Samuel (The guy into Real estate business in panama)

Real Estate Marketing

Waaaaaahhhhhhh the stimulus bill had been a big issue all over USA, Hope this problem will be resolved soon many professionals and businesses had been affected with this issue.